Where is he going the locomotive of Germany on which the fate of the European Union wagons depends to a large extent, once again under the fire of Eurosceptics as demonstrated by the outcome of the vote in Holland? A positive signal finally arrives today. After four months of slowdown, the PMI indices, both manufacturing and services, rebound even if the S&P Global composite index remains well below the 50 point threshold (47,10 points). But, on the eve of the final negotiation on stability pact, the machine of the German economy, already formidable, continues to launch warning signs. This could perhaps be good news for the Bel Paese, already accustomed to the Teutonic intransigence of the "zero debt" policy imposed by Wolfgang Schauble. Or, a new sign of Europe's decline, under the pressure of stronger partners in the USA and China.
The warning signals coming from Germany
Dramatic signs arrived this week for Made in Germany: The Colossus Bayer accused an 18% collapse in the stock market after the stop to an experimental anti-thrombosis medicine, 'Asundexian. The second defeat came from the negative verdict in a crucial trial in the United States related to the herbicide Roundup.
But what sounds the alarm for German chemistry, already the flagship of Made in Germany, is the productive decentralization, especially towards Asia where in the last fifteen years European direct investment in the sector has increased by around 50%. Basf, for example, is building a plant in China worth $10 billion.
The immediately visible result of this situation is the demolition of the chemical trade balance European Union, which went from annual surpluses of the order of 40 billion euros per year to almost zero, as noted above Bloomberg Javier Bias, one of the great experts in the sector. Plastics in Europe, he says, are everywhere, from food packaging to clothing, from mobile phones to construction materials. According to the European Environmental Agency, each citizen of the continent consumes 150 kilograms of plastic every year compared to a global average of 60 kilograms. But Europe - which continues to be a voracious consumer of resins, foams, paints and every other product in the sector - rather than producing them, imports them. All because of one progressive loss of competitiveness compared to other regions.
As this situation persists, industry managers see a 2024 made up of inevitable plant closures and relocations, especially in Asia, where in the last fifteen years European direct investment in the sector has increased by around 50%.
From the trade balance to the geopolitical one
From the trade balance to the geopolitical one, the step is increasingly shorter, these days as demonstrated by changing sectors, the mega BMW investment in the United States to benefit from the incentives provided by the American IRA plan.
The problems of industry are being transmitted from the trade balance, already the pride of Germany, to the geopolitical framework: Berlin can still be the talking cricket of the EU or, faced with a crisis of what remains of the European leaderships of the last century, it must change pace within one more expansionary European economic policy?
The mess with public debt
The decision of the Constitutional Court, of Karlsruhe to prohibit the use of funds originally intended for the fight against the pandemic for technological and environmental transformation, not only digs a potential hole of 60 billion in German ambitions for reconversion, but threatens the entire established practice of German governments to create off-balance sheet funds to be drawn on through subsequent debt issuance.
Germany weaker in negotiations on the Stability Pact
All additional problems for the German negotiating position on the reform of the stability pact in the EU and which explain the more flexible position on the part of the Berlin government. Or at least that part of the government that does not follow the traditional line. But the delay that Germany is accumulating in pursuing cutting the deficit at all costs, punishing the Italian cicadas seems suicidal. Berlin must choose whether to sacrifice the technological reconversion for which it is already late, or change the score and ideology and give new life to the other carriages of the convoy as well.
